Financial and Operating Performance Q1 2025 Financial Highlights Origin Bancorp's Q1 2025 highlights include $22.4 million net income, improved net interest income, and strategic debenture redemption Key Financial Highlights | Financial Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $22.4 million | $22.6 million | | Diluted EPS | $0.71 | $0.73 | | Net Interest Income | $78.5 million | $73.3 million | | Net Interest Margin (FTE) | 3.44% | 3.19% | | Total Loans (LHFI) | $7.59 billion | - | | Total Deposits | $8.34 billion | - | | Book Value per Common Share | $37.77 | - | - Total subordinated debentures decreased by $70.3 million (44.0%) to $89.6 million at March 31, 2025, from $159.9 million at December 31, 2024, following the redemption of eligible debentures201228 - The company announced a strategic initiative, "Optimize Origin," aimed at improving financial performance with a target of achieving a >1% ROAA run rate by Q4 2025, expected to drive approximately $23.4 million in annual pre-tax, pre-provision earnings improvement195 Results of Operations Analysis Q1 2025 results show increased net interest income driven by lower funding costs, alongside declines in noninterest income and rises in noninterest expense Net Interest Income and Margin Net interest income increased to $78.5 million in Q1 2025, with the NIM-FTE expanding to 3.44% due to lower funding costs Net Interest Income and Margin Trends | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $78.5M | $73.3M | +$5.1M | | Net Interest Margin (FTE) | 3.44% | 3.19% | +25 bps | | Yield on Earning Assets | 5.79% | 5.99% | -20 bps | | Cost of Interest-Bearing Liabilities | 3.30% | 3.88% | -58 bps | - The decrease in interest income on loans held for investment (LHFI) was $10.1 million, primarily due to lower average balances and yields on commercial loans, partially offset by a $2.8 million increase in income from interest-earning bank deposits200 - The decrease in interest expense was primarily driven by an $11.1 million reduction in interest on deposits, with $8.9 million of that attributable to lower interest rates199 Provision for Credit Losses Total provision for credit losses increased to $3.4 million in Q1 2025, driven by off-balance sheet items despite lower loan loss provisions - Total provision expense increased by $432,000 YoY, primarily due to an $805,000 increase in provision for off-balance sheet items, partially offset by a $410,000 decrease in provision for loan credit losses212 - The allowance for loan credit losses (ALCL) to nonperforming loans held for investment (LHFI) was 113.08% at March 31, 2025, a significant decrease from 243.27% a year prior, mainly due to a $40.9 million increase in nonperforming LHFI, of which $28.7 million is related to the previously disclosed questioned loan activity213 Noninterest Income Noninterest income decreased by $1.7 million (9.6%) to $15.6 million in Q1 2025, primarily due to losses from limited partnership investments and lower mortgage banking revenue Noninterest Income Components | Noninterest Income Component | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | $ Change | | :--- | :--- | :--- | :--- | | Insurance commission and fee income | 7,927 | 7,725 | 202 | | Mortgage banking revenue | 915 | 2,398 | (1,483) | | Limited partnership investment (loss) income | (1,692) | 138 | (1,830) | | Swap fee income | 533 | 57 | 476 | | Total Noninterest Income | 15,602 | 17,255 | (1,653) | - The decrease in mortgage banking revenue was mainly due to the sale of substantially all of the company's MSR asset in Q1 2024, which eliminated servicing revenue and MSR valuation adjustments in Q1 2025217 Noninterest Expense Noninterest expense increased by $3.4 million (5.7%) to $62.1 million in Q1 2025, driven by higher salaries and occupancy costs from strategic initiatives Noninterest Expense Components | Noninterest Expense Component | Q1 2025 ($ thousands) | Q1 2024 ($ thousands) | $ Change | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | 37,731 | 35,818 | 1,913 | | Occupancy and equipment, net | 8,544 | 6,645 | 1,899 | | Intangible asset amortization | 1,761 | 2,137 | (376) | | Total Noninterest Expense | 62,068 | 58,707 | 3,361 | - The increase in occupancy and equipment expense was primarily due to a $1.5 million expense associated with the strategic consolidation of eight banking centers, six of which closed during the quarter221 Financial Condition Analysis As of March 31, 2025, total assets grew to $9.75 billion, driven by securities and deposits, while the loan portfolio remained stable despite increased nonperforming loans Loan Portfolio Total loans held for investment remained stable at $7.59 billion, with growth in residential real estate offset by declines in commercial real estate and construction loans Loan Portfolio Composition | Loan Category | Balance at Mar 31, 2025 ($M) | % of Total | Balance at Dec 31, 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Commercial Real Estate | 2,383.8 | 31.4% | 2,477.4 | (3.8)% | | Construction/Land/Dev | 798.6 | 10.5% | 864.0 | (7.6)% | | Residential Real Estate | 1,955.0 | 25.8% | 1,857.6 | 5.2% | | Commercial & Industrial | 2,022.1 | 26.7% | 2,002.6 | 1.0% | | Mortgage Warehouse | 404.1 | 5.3% | 349.1 | 15.8% | | Total LHFI | 7,585.5 | 100.0% | 7,573.7 | 0.2% | - At March 31, 2025, 59.6% of the loan portfolio ($4.52 billion) had variable interest rates, while 40.4% ($3.06 billion) had fixed rates237 Asset Quality and Allowance for Credit Losses Nonperforming assets increased to $83.4 million in Q1 2025, with NPLs rising to $81.4 million, while ALCL coverage of NPLs stood at 113.08% Asset Quality Metrics | Asset Quality Metric | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Nonperforming Assets | $83.4 million | $78.6 million | | Total Nonperforming LHFI | $81.4 million | $75.0 million | | Ratio of NPLs to Total LHFI | 1.07% | 0.99% | | ALCL | $92.0 million | $91.1 million | | ALCL / Total LHFI | 1.21% | 1.20% | | ALCL / NPLs | 113.08% | 121.41% | - Classified and nonperforming loans were negatively impacted by litigation related to questioned activity involving a former banker, with the company continuing to work toward a resolution243185186 Securities Portfolio The securities portfolio grew by 5.3% to $1.18 billion, primarily in AFS securities, with a shortened weighted average effective duration - The increase in the securities portfolio was driven by new purchases and an improvement in the unrealized loss position, partially offset by principal paydowns and maturities261 - The company does not hold any Fannie Mae or Freddie Mac preferred stock, CDOs, CLOs, or securities directly backed by subprime or Alt-A mortgages263 Deposits Total deposits increased by $115.3 million (1.4%) to $8.34 billion, driven by money market growth and a decrease in the average rate paid on deposits Deposit Composition | Deposit Category | Balance at Mar 31, 2025 ($M) | % of Total | Balance at Dec 31, 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Noninterest-bearing demand | 1,888.8 | 22.7% | 1,900.7 | (0.6)% | | Money market | 3,209.6 | 38.5% | 2,930.7 | 9.5% | | Interest-bearing demand | 1,993.4 | 23.9% | 2,060.5 | (3.3)% | | Time deposits | 863.0 | 10.3% | 941.0 | (8.3)% | | Total Deposits | 8,338.4 | 100.0% | 8,223.1 | 1.4% | - Estimated uninsured deposits totaled $3.72 billion at March 31, 2025, which includes $822.0 million in public fund deposits collateralized by pledged assets274 Liquidity and Capital Resources The company maintained strong liquidity and capital, with stockholders' equity at $1.18 billion and all regulatory capital ratios well above 'well capitalized' thresholds Regulatory Capital Ratios | Regulatory Capital Ratios (Company) | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) Ratio | 13.57% | 13.32% | | Tier 1 Capital Ratio | 13.77% | 13.52% | | Total Capital Ratio | 15.81% | 16.44% | | Tier 1 Leverage Ratio | 11.47% | 11.08% | - The company redeemed $70.0 million in subordinated debentures, recognizing $681,000 of accelerated amortization of the original issue discount, expected to result in approximately $2.1 million in annualized future net interest expense savings275 - Available liquidity at March 31, 2025 included $2.15 billion from the FHLB and $1.39 billion from the FRBD discount window, with no borrowings outstanding against these lines276286 Risk Management and Controls Market Risk Disclosures The company's primary market risk is interest rate volatility, with NII and fair value of equity sensitivity within policy limits under various rate shock scenarios Interest Rate Sensitivity Analysis | Change in Interest Rates (bps) | % Change in Net Interest Income | % Change in Fair Value of Equity | | :--- | :--- | :--- | | +400 | 15.9% | (6.6)% | | +200 | 8.3% | (2.6)% | | +100 | 4.3% | (1.1)% | | -100 | (5.1)% | 0.8% | | -200 | (8.2)% | 1.5% | - The company's internal policy limits the decline in estimated NII for a 100-basis point shift to no more than 10.0%, with the current simulation showing a 5.1% decline in a -100 bps scenario, which is well within this limit300303 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period307 - No material changes to internal control over financial reporting were identified during the first quarter of 2025308 Other Information Legal Proceedings and Risk Factors The company maintains a $2.8 million contingency reserve for legal proceedings related to a former banker, with no material changes to previously disclosed risk factors - A contingency reserve of $2.8 million was held at March 31, 2025, related to questioned activity by a former banker in the East Texas market, with total expenses associated with this matter being $543,000 for Q1 2025186 - There were no material changes to the risk factors disclosed in the company's 2024 Form 10-K during the quarter312 Equity Repurchases and Other Disclosures The company has a $50 million stock repurchase program authorized, but no shares were repurchased during Q1 2025, and no Rule 10b5-1 trading arrangements were modified - The company has a $50 million stock repurchase program authorized in July 2022313 - No stock repurchases were made during the quarter ended March 31, 2025314
Origin Bank(OBK) - 2025 Q1 - Quarterly Report